As an agency leader, have you ever found yourself in a situation where you underestimated a project’s scope of work? Or maybe you missed out on pricing some essential tasks in your proposal, only to realise later that you ended up working on them anyway? If so, you’re not alone. Many agency leaders encounter these issues, leading to unprofitable projects and unhappy clients.
We spoke to Freia Muehlenbein, the founder of Be-Reyt, a consultancy firm that helps agencies improve their profitability, who showed us the importance of spending the time to get the scope of work right.
Understanding the Scope of Work
The scope of work refers to the tasks, deliverables, and timeline required to complete a project successfully. It’s essential to define the scope of work accurately at the beginning of a project to avoid miscommunications, missed deadlines and unexpected costs. Understanding the scope of work helps agencies plan their resources and budget effectively.
Freia Muehlenbein emphasises the need to involve the right people in scoping a project. She notes that many agencies underestimate how long tasks take, leading to unprofitable projects. Agencies need to involve the experts in the channel or service line to ensure that the project’s scope of work is well-researched and accurately defined.
Pricing the Scope of Work
Pricing a project involves calculating the costs involved in delivering the services and adding a profit margin. Pricing the scope of work accurately can be challenging, but it’s crucial to ensure profitability. Many agencies fail to price in all the work involved in a project, such as onboarding, client meetings, and project management time.
Document and map out every process to understand how long tasks take and ensure that you price your services accurately.
Agencies use different pricing strategies, such as blended rates, tiered pricing, and value-based pricing. Freia notes that the most profitable agencies use tiered pricing or value-based pricing. Blended rates, where an average cost or price per day or hour applies to anyone working on accounts, can lead to underpricing of senior staff, resulting in unprofitable projects.
Formalising the Scope of Work
Once the scope of work is defined and priced, it’s essential to formalise it in writing. Formalising the scope of work creates a reference point for the client and the agency and ensures that everyone understands what’s included in the project and what isn’t. It also helps you avoid over-servicing and scope creep.
Regularly Reviewing the Scope of Work
Finally, it’s crucial to review the scope of work regularly. Freia recommends that agencies review their rates and pricing strategy annually and review each client’s pricing individually to ensure profitability. Regular reviews can help agencies identify unprofitable clients and adjust their pricing accordingly.
It’s crucial that you create an accurate and well-researched scope of work. It helps avoid unprofitable projects, missed deadlines and unexpected costs.
To create an accurate scope of work, involve the right people, price your services accurately, formalise the scope of work in writing and review it regularly.
By following these steps, you can improve your agency’s profitability and deliver successful projects to your clients.
Freia Muehlenbein, Founder, Be-Reyt
Freia is an expert agency growth consultant specialising in strategy delivery, operations, project profitability, processes, and leadership.